What’s The Verdict: Comcast and Houston Sports battle over bankruptcy and alleged scheming, who is behind it?

What’s The Verdict: Comcast and Houston Sports battle over bankruptcy and alleged scheming, who is behind it?

Houston Regional Sports Network has been in an involuntary bankruptcy phase but most recently, a litigation trustee filed a complaint accusing Comcast of doing everything in its power to impair the Network in an attempt to acquire the rights to broadcast Houston Astros (baseball) and Houston Rockets (basketball) games at a significant discount.

Robert Ogle makes clear that the cable giant has a track record of poor customer service and that since Houston Regional Sports Network was set up in 2003, they have experienced Comcast’s ‘dishonesty’ firsthand. It was in 2010 that Comcast became a partner with a 22.5 percent interest in the network and the teams, Astros and Rockets, owned the rest of the percentage. At this point, Comcast said it would use its power to achieve promised rates, gave an advanced loan for $100 million, amongst other things. In addition, the sports teams granted the Network exclusive rights to games through the year 2032 for hundreds of millions. This all happened in 2010 and then in 2013 is where problems arise.

The complaint (filed by the Network) asserts that Comcast has been doing everything in its power to acquire its primary and most valuable assets, the right to telecast programming related to Houston Astros and Houston Rockets, as well as the right to receive revenue from affiliation agreements with MVPDs that carry CSN Houston. What’s interesting is that Houston Regional Sports Network was never able to reach affiliations with a major MVPD; thus, the lawsuit claims this was intentional on Comcast’s part. Other regional sports networks owned by Comcast were able to make deals but the major difference is that with these other networks, Comcast owned most, if not all, of the equity.

In effect, Houston Regional Sports Network began to experience liquidity constraints because they couldn’t make any big distribution deals. This caused the Astros and Rockets to offer to sell their own equity to Comcast, but they didn’t take the offer. So what happened next? The financial situation of Houston’s Regional Sports Network continued to grow worse, which eventually led to a buy-out offer from Comcast at a much lower price. Mr. Ogle says that all of it was part of Comcast’s plan and that Houston’s RSN was basically a scheme. How was it a scheme?

Comcast would put the Debtor (HRSN) into bankruptcy and automatically its value would drop substantially. With that, Comcast would make a statement of its intention to offer a great amount of money to acquire the Debtor plus assets, which would scare away other potential buyers. Once it was clear that Comcast was the only likely buyer, Comcast could buy the Debtor plus assets at an even smaller price than it had stated. This is because there would be no other buyers so HRSN would have no other option but to take the offer regardless of how small it was.

Point being, Rockets and Astros were in terrible position and the truth is that Comcast played a role in this. The teams ended up selling to AT&T and DirectTV for $5000 which is a lesser value than they would’ve made if they simply liquidated all their assets in 2013. Comcast of course denies all claims and allegations as entirely without merit.

What do you think will happen? Stay tuned for more on What’s The Verdict!